NYC Tour: Bright Lights, Tight Markets, Regulatory Fog

Research evidence excerpt

NYC Tour: Bright Lights, Tight Markets, Regulatory Fog

• Intro 518. It is worth keeping an eye on progress on this proposed New York City Council bill

(also known as the Delivery Protection Act) that targets major e-commerce and last-mile delivery

companies. These companies, including Amazon, would be required to directly employ their

drivers, shifting them away from subcontracted models.

Empire State Realty Trust (ESRT): North 6th Street - Williamsburg Retail

We met with Steve Horn, EVP - CFO; Ryan Kass, EVP Co-Head of Real Estate and Chief Revenue Officer;

Joshua Attie, Head of Investor Relations; and Jason McGrath, Director of Investor Relations, to tour ESRT's

Williamsburg Retail portfolio.

• Curating luxury portfolio. ESRT accumulated a $302M portfolio through multiple acquisitions,

and ESRT is now the largest retail landlord on North Sixth Street (AKR is another large institutional

owner on this block), anchored by Google's first standalone retail location and the upcoming

Hermes flagship. ESRT is executing a "quiet luxury" curation strategy, replacing local operators

with global brands, including Rolex/Bucherer, Breitling, Chanel, Hermes, and recently Hoka, to

capture a young, affluent demographic. As of 3/31, ESRT's in-service North Sixth Street collection

was 97.5% leased and 85.0% occupied with rents of ~$149 psf.

• Rents. Recent leasing saw rents in the $300-450 psf range. While lower than Fifth Avenue or

prime Soho ($1,000+), the corridor is seeing rapid appreciation as brands view it as the obvious

expansion after Soho. ESRT has highlighted significant mark-to-market rents over time, having

acquired in the 4-5% range, and expects it to be >6% following lease-up.

• Recent acquisition. ESRT's latest addition is 41-55 North Sixth Street, a newly constructed